Guest Post: Africa - China And Japan's Next Battleground?

We have long held that Africa is a crucial region of the world in the near future because there is no more incremental debt capacity at any level: sovereign, household, financial or corporate - in any other region. As we noted previously:

without the ability to create debt out of thin air, be it on a secured or unsecured basis, the ability to "create" growth, at least in the current Keynesian paradigm, goes away with it. Yet there is one place where there is untapped credit creation potential, if not on an unsecured (i.e., future cash flow discounting), then certainly on a secured (hard asset collateral) basis. The place is Africa, and according to some estimates the continent, Africa can create between $5 and $10 trillion in secured debt, using its extensive untapped resources as first-lien collateral.

Africa is precisely where the smart money (and those who quietly run the above mentioned "power echelons"), namely China and Goldman Sachs, have refocused all their attention in the past year precisely because they both realize that Africa is the last and only bastion of untapped credit growth and capacity.

Africa in geographical perspective...

So it is perhaps unsurprising that China's current arch-enemy Japan - and its apparently bottomless well of printed money - are taking aim also...

As tensions between China and Japan multiply, there is an increasing battle for influence in other states. For example, in his recent article in The Diplomat, Jin Kai noted China and Japan’s global media war. There has also been an upswing in more traditional diplomatic wrangling, with Japan seeking to increase its influence in ASEAN as an attempt to reduce China’s sway in the region. With both China and Japan seeking to assert their leadership over the Asia-Pacific, it makes sense that both countries would woo ASEAN. It’s a bit more surprisingly to see China-Japan diplomatic competition supposedly pop up in Africa.

Recently, China’s Foreign Minister Wang Yi and Japan’s Prime Minister Shinzo Abe both visited the African continent. Abe left on January 9 for a week-long tour of the Ivory Coast, Mozambique, and Ethiopia. Meanwhile, Wang was in Africa from January 7 to January 11, visiting Ethiopia, Djibouti, Ghana, and Senegal. Given the current chill in China-Japan relations (and the tendency for both countries to snipe at each other in the media), the two trips quickly morphed into a sign of ‘competition’ over Africa.

Both countries rejected the idea that they were competing. When Chinese Foreign Ministry spokesperson Hua Chunying was asked to comment on the idea that Wang Yi’s visit to Africa “is directed against Japan,” she responded that anyone harboring this idea “is not so acquainted with the past and present of China-Africa relations.” Indeed, as Hua pointed out, it’s traditional for Chinese Foreign Ministers to visit Africa as their first overseas trip of the new year. Hua praised China “sincere and selfless help” for Africa, and warned that trying to stir up a rivalry in Africa is “a wrong decision which is doomed to fail.” This comment was likely directed at Japan, but could just as easily apply to the United States and other countries seeking to increase their influence in Africa.

Japan also denied that Abe’s visit to Africa had anything to do with China. Hiroshige Seko, a deputy chief cabinet secretary, was quoted in an Associated Press article as saying that competing against China is “not our intention at all.” Seko added, “As far as the African nations are concerned, they are important regardless of China.” African countries are important to Japan for the same reason they are to China — a wealth of natural resources as well as ample opportunity for foreign investment. The New York Times pointed out that increasing ties with Africa is just one aspect of Abe’s diplomatic strategy, all of which is designed to support “Abenomics.”

In a speech in Ethiopia, Abe reaffirmed Africa’s importance. “A considerable number of Japanese believe that Africa is the hope for Japan,” he said. His speech focused almost entirely on the potential for a positive relationship between Africans and Japanese companies — including how Japanese management strategies can benefit African people. “When Japanese companies that value each and every individual come to Africa, a win-win relationship in the truest sense can emerge,” Abe said. By contrast, his vision of the Japanese government’s role in Africa seemed like an afterthought. Abe did discuss his wish for more cooperation with the African Union, and offered to increase Japans’ assistance and loans to the continent, but he spent far less time on this point than on extolling the virtues of Japanese businesses.

Japan’s strategy, in other words, is economically focused. It’s clear that Abe’s pursuit of a relationship with Africa is closely connected with Japanese businesses. China, on the other hand, constantly emphasizes the “friendship” between its government and those of African nations. Though Chinese companies do big business in China, Beijing almost never alludes to this fact in its official remarks. When joint projects (such as roads or government buildings) are brought up, these projects are always a sign of China’s friendship towards Africa.

Accordingly, in his speeches Wang Yi focused on the government-to-government relationships between China and African nations. In Senegal, Wang called for both countries “to firmly support each other’s core interest[s] and major concerns.” In Ghana, he spoke about the need “to promote practical cooperation through strengthening traditional friendship.” China’s relationships with African countries are focused not just on business opportunities (although of course that’s an important aspect) but also on gaining African diplomatic support for China’s policies.

Whereas Abe seems content to have Japanese businesses make profits, China is actively pursuing soft power on the continent. This is nothing new for China. A 2013 study by Gustavo Flores-Macías and Sarah Kreps of Cornell University found that, since the mid-1990s, China has been quite successful at parlaying its trade relationships in Africa and Latin America into tangible foreign policy support. Japan doesn’t seem to be seeking this sort of influence (at least, not yet). Instead, Abe is more openly concerned with increasing economic interactions. While China and Japan may look like they’re competing in Africa, the two countries are actually playing different games.

Colonization is alive and well in Africa - the poor locals will be raided and stripped of their resources by the likes of China/Japan , before they realise what has hit them. On the other hand their African leaders/ politicians wiil be handsomely rewarded. Nothing ever changes in Africa.

The other BIG problem with this article is that apparently the author has apparently just crawled out from under a rock and never actually spent any time doing business in Africa.

The FDI (economic cold war) between China and Japan has been going on for YEARS (almost since that other "Cold War" supposedly ended). In Africa, the Chinese have a lead but Japanese firms and State investment vehicles (like JICA) are also on the ground slugging it out (in way that USAID and ExIm aren't).

But yeah, who gives a shit about debt capacity? It's simply tool to facilitate INFLUENCE and ACCESS, with an eye to CONTROLLING the stock and flow of food and energy (and to a much lower extent- building new markets and buyers for their domestic exporters, who are already beneficiaries of their States' pursuits of ambition).

"Mansa Musa's crowning achievement was his famous pilgrimage to Mecca, which started in 1324 and concluded with his return in 1326. Accounts of how many people and how much gold he spent vary. All of them agree it was a very large group (the mansa kept a personal guard of some 500 men),[43] and he gave out so many alms and bought so many things that the value of gold in Egypt and Arabia depreciated for twelve years.[44] When he passed through Cairo, historian al-Maqurizi noted "the members of his entourage proceeded to buy Turkish and Ethiopian slave girls, singing girls and garments, so that the rate of the gold dinar fell by six dirhams."

Musa spent so much that he ran out of money and had to take out a loan to be able to afford the journey home.[citation needed] An alternative explanation is that he borrowed gold from Cairo's money-lenders at high interest to attempt to correct the depreciation of gold in the area due to his spending.[45] Musa's hajj, and especially his gold, caught the attention of both the Islamic and Christian worlds. Consequently, the name of Mali and Timbuktu appeared on 14th century world maps."

Let me add as really crucial areas going forward. #1 Greenland, as their ice cover receeds, the resources under all that ice are exposed. Greenland already is signing exploration contracts right and left. #2 The arctic seas, Russia is trying to drill, one American company tried and failed to drill in the arctic seas, but we now have most of the entire sea ice free in summer, allowing exploration and drilling. The fight for rights up there is underway with all the big players involved. Plus the shipping lanes are now open, the first large bulk freighter made the Northwest passge this year, around 7 tankers have made the passage in recent years. #3 In the more distant future, Antarctica will be a major field of struggle. Major nations have a permanent presence and exploration for resources is underway on a scientific scale. I see the far north as a growing scene of struggle for access. Canada and the US are already in open dispute over Canadian claims to territorial waters. The USN sails through the Canadian claims every so often to show Canada that we don't accept their claim.

All I will say is, my sympathies for those who have to work on those boats, and who have to work/live in those Arctic communities that will be developed further, as a result of increased NW Passage shipping. I did my time! I'm done, and ain't going back.

Sorry for the Japanese, but I do believe they have missed the boat. They will be a "protectorate" of China down the road. Debt loads, dependence upon the "Zombie States" for defense, etc., China's command and control of world resources and proximity will make it so.

"Dear Germany, We have your gold, but give us a few years to find it. We have Jon Corzine diligently searching for it. Sincerely, the Federal Reserve."

the "vast empty space" on Earth is Europe itself. That's what is in fact being fought over. to some extent this is also true of the USA as well...although because of the railroads they not only claimed but monetized the entirety of the American Continent. If there is any "earthling plan" I think it remains the same from the time of Napoleon. Name one major war fought since that time fought outside Europe? The only one is the US Civil War (and to some extent the Mexican/American war.) Iran/Iraq war was big as was Vietnam....but that's about it.

My engineering career in the US has been stalled for a few years and I thought this would be a good way to shake things up and make some money. I also thought I was getting in on the ground floor of a solid long-term project.